As minimum wages rise and labor laws change, hiring a few unpaid summer interns seems like an easy and cost effective way to get caught up on clerical work while avoiding the commitment of bringing on a brand new employee. However, Business owners and Entrepreneurs should beware the legal pitfalls with interns! Read on for some information on how to stay compliant.
Once upon a time, “the intern” was an easily abused, free for all position. Before the days of Seamless and legal restrictions, many were utilized for those important lunch pickups and other “go-for jobs”. Their free labor was compensated by experience in an industry, connections, or something to add to their resumes. This exchange was easily abused by companies and left many participants of internships with neither monetary or educational compensation.
Hollywood and Interns
Arguably, some of the biggest abusers of the unpaid intern were Hollywood and the film industry. An industry where young hopefuls are desperate to break in and follow their dreams, Hollywood effortlessly exploited this eagerness. Many college educated adults turned to working unpaid in the hopes of breaking into this competitive world. In many cases, these positions are excellent opportunities for young professionals to get a foot in the door and prove their capability to important individuals that could provide employment later on. However, as average student loan debt increases and the cost of living rises, the ability to work unpaid, without a financial burden, has become yet another privilege that only a distinct group of people can participate in. Realistically, many just cannot afford to work for free in expensive cities like LA or NYC. This frustration with alleged labor exploitation has been part of the basis for several lawsuits against big studios such as Sony, Warner Bros., Viacom and MGM.
Interns Fight Back
One of the most notable cases on unfair labor practices in regards to interns was the 2011 class action suit against Fox Searchlight Pictures, that ultimately reached settlement in 2016. This case began with Eric Glatt, who at the age of 40 quit his job in finance to purse a career in documentary filmmaking. Glatt had worked unpaid on the 2010 critically acclaimed box office hit Black Swan. Fox Searchlight Pictures produced this film with a $13 million dollar budget, yielding $329.4 million at the box office. Glatt, who performed administrative and clerical functions during production, alleged that Fox was having interns perform tasks with little to no educational value, therefore disqualifying a fair exchange for unpaid services. After a lengthy litigation process, including an appeal by Fox, the case was finally settled with plaintiff rewards ranging from $495 to $7,500.
This landmark case has had a major impact on the film industry, as well as internship programs across all fields. At the beginning of 2018, the Department of Labor (DOL) released new guidelines regarding the classification of unpaid internships in the for-profit sector, switching from a six-point test under the Obama administration to a “primary beneficiary” test applied by several federal appellate courts.
Issues with the DOL
In spite of the DOL standards, employers still may run into problems, as not all federal courts rely on the primary beneficiary test. Different requirements may also exist under state and local wage and hour laws. For example, the New York State Department of Labor (NYSDOL) does not use the primary beneficiary test. The NYSDOL uses a test consisting of 11 criteria, all of which must be met in order for an intern to be unpaid. These criteria are meant to establish whether or not an employment relationship exists. Providing the intern with an educational experience is heavily stressed, as well as unpaid positions not being used to replace fully paid employees. The training provided to the intern should not be solely applicable to the company and should be transferable to other industries. Overall, the operations of the company should not rely on the work of the intern. It is also required that the unpaid internship have a specific time frame (start and end date), and the intern be notified of their unpaid status formally in writing.
Seek Help from Experts
These labor laws, while somewhat rigid, are ultimately meant to protect interns AND actual employees, as it protects the employees jobs from being replaced by any free alternatives. If you’re planning on implementing an internship program at your company, you should consult with experts to ensure compliance with all applicable laws and regulations. Reach out to the experienced professionals at Advisable who can provide guidance and best practices with respect to hiring interns.
About the author
Rebecca Anapol is a Business Affairs Administrator at a Business and Entertainment Law Firm in New York. She has both prior legal and theatre design experience in the New York Area. She received her degree from SUNY New Paltz.
She has previously worked assisting opera designers and has a love for all things theatre.